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The Economic Impacts of the Tobacco Settlement

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Author Info
David M. Cutler
Jonathan Gruber
Raymond S. Hartman
M.B. Landrum, J. Newhouse
Meredith B. Rosenthal

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Abstract

Recent litigation against major tobacco companies culminated in a Master Settlement Agreement' (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. We outline the terms of the settlement and analyze whether it was a move toward economic efficiency using data from Massachusetts. Medicaid spending will fall, but only a modest amount ($0.1 billion). The efficiency issue turns mainly on the treatment of health benefits from reduced smoking induced by the settlement. We conclude that the settlement was a move towards economic efficiency.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7760.

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Date of creation: Jun 2000
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Handle: RePEc:nbr:nberwo:7760

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I1 - Health, Education, and Welfare - - Health
K0 - Law and Economics - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Showalter, Mark H., 1999. "Firm behavior in a market with addiction: the case of cigarettes," Journal of Health Economics, Elsevier, vol. 18(4), pages 409-427, August. [Downloadable!] (restricted)
  3. Decicca, P. & Kenkel, D. & Mathios, A., 2000. "Putting Out the Fires: Will Higher Taxes Reduce Youth Smoking," Papers 00-3, Aarhus School of Business - Department of Economics.
    Other versions:
  4. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  5. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1994. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Laux, Fritz L., 2000. "Addiction as a market failure: using rational addiction results to justify tobacco regulation," Journal of Health Economics, Elsevier, vol. 19(4), pages 421-437, July. [Downloadable!] (restricted)
  7. Frank J. Chaloupka & Kenneth E. Warner, 1999. "The Economics of Smoking," NBER Working Papers 7047, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    • Chaloupka, Frank J. & Warner, Kenneth E., 2000. "The economics of smoking," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 29, pages 1539-1627 Elsevier. [Downloadable!] (restricted)
  8. Merriman, David, 1994. "Do Cigarette Excise Tax Rates Maximize Revenue?," Economic Inquiry, Oxford University Press, vol. 32(3), pages 419-28, July.
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  11. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jonathan Gruber, 2001. "Youth Smoking in the 1990's: Why Did It Rise and What Are the Long-Run Implications?," American Economic Review, American Economic Association, vol. 91(2), pages 85-90, May. [Downloadable!] (restricted)
  2. Jonathan Gruber, 2001. "Tobacco at the Crossroads: The Past and Future of Smoking Regulation in the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 193-212, Spring. [Downloadable!] (restricted)
  3. Theodore E. Keeler & Teh-wei Hu & Michael Ong & Hai-Yen Sung, 2004. "The US National Tobacco Settlement: the effects of advertising and price changes on cigarette consumption," Applied Economics, Taylor and Francis Journals, vol. 36(15), pages 1623-1629, August. [Downloadable!] (restricted)
  4. D. Cutler & R.G. Frank & C. King III & M.B. Rosenthal & E.R. Vigdor & A.M. Epstein & R.S. Hartman & J.P. Newhouse, 2000. "How Good a Deal Was the Tobacco Settlement?: Assessing Payments to Massachusetts," NBER Working Papers 7747, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Courtney van Houtven & Edward Norton, 2006. "Economic Effects of Informal Care," Swiss Journal of Economics and Statistics (SJES), Special Issues, Swiss Society of Economics and Statistics (SSES), vol. 142(S (specia), pages 13-22. [Downloadable!]
  6. Donald Lacombe & Harold Winter, 2004. "In or out? explaining state shares of the tobacco Master Settlement Agreement," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 11(3), pages 279-285, November. [Downloadable!] (restricted)
  7. Jonathan Gruber, 2000. "Youth Smoking in the U.S.: Prices and Policies," NBER Working Papers 7506, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. David Cutler & Jonathan Gruber, 2001. "Health Policy in the Clinton Era: Once Bitten, Twice Shy," NBER Working Papers 8455, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Henrik Hammar & Olof Johansson-Stenman, 2004. "The value of risk-free cigarettes - do smokers underestimate the risk?," Health Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 59-71. [Downloadable!]
    Other versions:
  10. Gabriel A. Picone & Frank Sloan & Justin G. Trogdon, 2004. "The effect of the tobacco settlement and smoking bans on alcohol consumption," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1063-1080. [Downloadable!]
  11. Douglas E. Levy & Ellen Meara, 2005. "The Effect of the 1998 Master Settlement on Prenatal Smoking," NBER Working Papers 11176, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Jeffrey D. Kubik & John R. Moran, 2001. "Can Policy Changes Be Treated as Natural Experiments? Evidence from State Excise Taxes," Center for Policy Research Working Papers 39, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
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